Effort Reporting: Back to the Basics NCURA FRA 2013 New Orleans Patrick Fitzgerald Associate Dean for Research Administration Harvard University Faculty of Arts and Sciences

Effort Reporting… not the PIs’ favorite task… 2

3 Regulations Governing “Effort Reporting” for Universities OMB Circular A-21  Cost Principles for Educational Institutions  Section J. 10: “Compensation for personal services ” Payroll distribution system “will reasonably reflect the activity for which the employee is compensated by the institution…”

Overview of Requirements Theory:  Salary charged to sponsored agreements is based on estimate of effort on the project  Must verify how much effort actually expended to ensure that charges are appropriate Why?  Provides support for salary charged to sponsored agreements  Labor costs are 2/3 of direct research costs  Documents that effort commitments have been met; direct charged salary and cost sharing 4

5 A-21 Section J.10 “Compensation for personal services”  Covers amounts paid by the institution for services rendered during the period of performance under sponsored agreements,  Costs are allowable to the extent they conform to the established policies of the institution and are consistently applied  Reliance is placed on estimates in which a “degree of tolerance” is appropriate

6 A-21 Requirements After-the-fact confirmation of personnel costs charged to sponsored agreements Signed by the employee, principal investigator or responsible official(s) using suitable means of verification that the work was performed Must be incorporated into institution’s official records Reports will reasonably reflect the activities for which employees are compensated by the institution

Discussion Question #1 Who has primary responsibility for signing effort certifications at your school?  Does your policy assign this responsibility to the right person?  What do you think constitutes “suitable means of verification” that the work is performed? 7

8 A-21 Requirements The institution’s effort reporting system must provide for modification of an individual's salary distribution commensurate with a significant change in the employee's work activity  A-21 doesn’t define “significant” Time is expressed in terms of a percent of total activity (“effort”)—not hours Frequency of reporting varies depending upon method of certification

Discussion Questions Harvard requires monthly effort certifications for non-faculty. We will be changing to quarterly. 1. What is the frequency of certification at your institution? 2. Is this the appropriate interval? If not, what do you think is the appropriate frequency for certification, and why? 3. What would a federal auditor do if a certification is not signed? 9

10 A-21 Requirements Effort reporting system should be part of institution’s official records System will provide for independent internal evaluations to ensure compliance What is the “independent internal evaluation” process at your institution?

11 A-21 Section J.10d. Salary rates for faculty members  Charges for work performed on sponsored agreements by faculty members during the academic year will be based on the individual faculty member’s regular compensation….  In no event will charges to sponsored agreements exceed the proportionate share of the base salary for that period What does “proportionate share” mean?

12 A-21 Section J J.10.d.(2) Periods outside the academic year  Work performed during summer months will be paid a rate not in excess of the base salary divided by the period to which the base salary relates.  NSF policy change -- maximum of two months summer salary may now be paid over calendar year as “supplemental” salary

13 Effort Certification--Recap Salary is charged during the project and actual effort is certified after the activity has occurred. Salary must be commensurate with effort Certification = verification that effort commitment was fulfilled

14 Managing Effort Salaries = Actual effort, not estimated Whose effort is committed in the proposal?  Direct-charged salary  Cost shared salary Adjustments/reductions? Reduced budget = reduced effort?  Scope of work changes  No cost extension: who pays for salaries during the extension period?

15 Effort Reporting – Areas of Risk Faculty effort based on 100%, not hours worked  How do we differentiate faculty’s institutional time from personal time? Standard for reporting=“reasonable” (not precision). What is a reasonable variance? Institutional Base Salary: 12 months; 10 months; 9months How do we deal with consulting effort?

16 Effort Reporting – Areas of Risk Proposals with no effort commitment  OK for equipment grants, travel grants, conference grants only Personnel with salary charged to projects for which there was no effort commitment in the proposal, especially administrative salaries Cost transfers made after effort has been certified

17 Effort Reporting – Areas of Risk Charging 100% of salary to sponsored projects  Doesn’t leave time for other activities  How do you account for proposal preparation? Charging salary to grants in excess of effort provided  Summer salary for academic year effort  Not providing required level of effort for NIH Career awards

18 Effort Reporting – Areas of Risk Individual certifying effort does not have “suitable means of verification” Certification is signed after the period required by institution’s policy Charging salary on NIH grants in excess of cap Failure to track effort commitments for which salary wasn’t requested (cost sharing) No documented “internal independent evaluation” process

19 Ideas to Minimize Risk Evaluate Effort Reporting/Certification Policy  Policy should be understandable and flexible  Does frequency of certification and required time period for certification make compliance more challenging?  Who can certify effort? Is this who should certify? Engage and Educate Faculty  Explain “why” in addition to “how” Relationship of effort reporting to grant terms Consequences of not following policy Salary should be commensurate with effort

Ideas to Minimize Risk Review of salary charges to avoid future problems  Gaps in support for postdocs/grad students  Avoid over-expenditures, misallocation, transfers Avoid 100% Effort Charges to Grants  Doesn’t allow for other activities  We can’t draw a bright line between compensated effort and uncompensated, especially for faculty  Most faculty and researchers prepare proposals 20

Ideas to Minimize Risk Document your “internal independent evaluation” process Education is the Key to Compliance Remember, you will be audited against A-21 and your institutional policies Learn from others—Audit findings at other institutions keep us informed and help us prevent similar problems 21

NSF OIG Recent Audit Findings 22

NSF Audit of Cornell* 23 “Cornell’s policies and procedures did not:”  Adequately define what constitutes suitable means of verification  Require certifiers to document how they obtained suitable means of verification, or  Hold certifying officials accountable for non-compliance of policies and procedures;  Require the training or involvement of key grants management personnel  namely principal investigators (PIs), in the effort certification process  Identify the use of group certifications whereby one administrative manager certifies multiple employees effort for an entire year with a single signature without supporting documentation from the employee or the PI.” *NSF OIG, Semiannual Report to Congress, March 2010

24 University of Delaware (NSF)* 6 employees lacked an understanding of their responsibilities for effort reporting Labor charges were certified up to 600 days after the University’s mandated turn around time Lack of policy defining what constitutes suitable means of verification Administrative time or excess salary charged to NSF grants *NSF OIG, Semiannual Report to Congress, March 2010

25 More Examples SUNY Stony Brook*  Employees did not have first hand knowledge when they certified effort reports University of Wisconsin-Madison*  Inadequate oversight of the effort reporting process and inadequate training of personnel involved in the labor effort reporting process *NSF OIG, Semiannual Report to Congress, March 2010